In the tech sector, GoPro Inc (NASDAQ:GPRO) and its most notable business partner Ambarella Inc (NASDAQ:AMBA) have taken major hits following GoPro’s markedly lower-than-expected earnings. In reaction, analysts have reduced their price target on both stocks, while offering mixed views. Below are the changes along with current ratings and comments.
Yesterday, Piper Jaffray analyst Erinn Murphy reiterated an Underweight rating on shares of GoPro, and reduced the price target to $7 (from $7.50), which implies a downside of 29% from current levels.
Murphy commented, “Going forward, mgmt. is doing away with quarterly guidance and will stick to FY only. While there are several puts and takes with FY16 gross margin, our assumption is this will still be down for the year–even with product launches. Mgmt indicated that SG&A would grow sequentially each quarter from the $165-$170M range in Q1. With this as a backdrop, we see negative earnings in FY16 and FY17 and thus are changing our valuation methodology from P/E to EV/sales. Our revised PT moves from $7.50 to $7. While channel inventory is expected to improve by the end of Q1 and be even better by Q2 end, we need to see organic demand pick up. If this does not occur, we believe cost cuts should ensue. All in, for now, we still believe the stock proves challenging to invest in.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Erinn Murphy has a yearly average return of -10.4% and a 34.5% success rate. Murphy has a -9.9% average return when recommending GPRO, and is ranked #3539 out of 3621 analysts.
Out of the 19 analysts polled by TipRanks, 6 rate GoPro stock a Buy, 11 rate the stock a Hold and 2 recommend a Sell. With a return potential of 49%, the stock’s consensus target price stands at $14.60.
Canaccord analyst Matt Ramsay reiterated a Buy rating and long-term conviction on shares of Ambarella, while lowering the price target to $65 (from $90), which represents a potential upside of 72% from where the stock is currently trading.
Ramsay wrote, “Despite the very challenging situation at this key partner, we believe Ambarella’s product portfolio is well positioned for growth in other end markets where sales and earnings contributions are often under-appreciated. In fact, we maintain our belief Ambarella’s portfolio of highly differentiated applicationspecific video encode, compression, and analytics SoCs will maintain strong market share against SoC competition and positions the company for strong sales and earnings growth driven by markets including security, drone, automotive, wearable and other cameras and new computer vision applications.”
“Despite the very rocky start to 2016 for AMBA shares too often tied to only GoPro sentiment, our long-term conviction remains and we believe the disproportional decline in share price versus fundamentals outside GoPro presents a buying opportunity for long-term investors,” the analyst concluded.
According to TipRanks.com, analyst Matt Ramsay has a yearly average return of -13.5% and a 20% success rate. Ramsay has a -41.4% average return when recommending AMBA, and is ranked #3554 out of 3621 analysts.
Out of the 11 analysts polled by TipRanks in the last 3 months, 7 are bullish on Ambarella stock, while 4 are neutral. With a return potential of 92.46%, the stock’s consensus target price stands at $74.